Both Prime Ministers inherited fractured economies. They were not curable by mild reforms or mid-term reforms. They needed strong, assertive and comprehensive reforms to dwarf the ills of fractured economies. While Mr Modi received high inflation inflicted and deeply rooted corrupted economy, Mr Abe received an economy, which was shackled by pro-longed recession, loss of domestic demand, weak financial health of the economy and a long stretch of weak leadership after Mr Koizumi quit the leadership.

In the backdrop of dark days for the economies, India and Japan elected new charismatic leaders - Mr Narendra Modi and Mr Shinzo Abe. People of both countries bestowed big hopes for an upturn in the economy. They expected that both Prime Ministers would lay appropriate seeds to germinate the plants for resuscitation of the economy by adopting radical reforms in the economy.

Mr Modi asserted for a corruption free economy and an investment friendly destination for the industry. He adopted Make in India – a concept to built up a strong base for manufacturing. He realigned in between the policy network and the practice of actual doing business by inducting ease of doing business with Minimum government, Maxium governance practices.

Mr Abe adopted 3 Arrow economy policy to decimate two decades’ deflation , encourage domestic manufacturing and domestic consumption , stimulate investment with a flexible fiscal policy and nip the bid of weak financial heath by fiscal consolidation and spur the growth by policy packages. The immediate goal of 3 Arrow economy, dubbed “Abenomics”, was to raise inflation by 2 percent in short term.

What went wrong with the much talked about Modi’s several economic reforms, and Abe’s 3 Arrow economic reforms to get rid of Japan from the protracted economic recession? So far the successes of both Prime Minsters’s reforms were unclear. Modi’s reforms plunged to the perils of Parliamentary democracy and Abe’s reforms failed to generate even a normal growth in the economy.

All the actions have not produced results. Modi’s Make In India failed to stir the sentiment of investors. The two Budgets by Modi government remained dormant to enthuse the investors. Fall in the inflation was not due to Modi’s economic reforms. It was the dip in global oil prices, which made Mr Modi lucky to get low inflation. So far there is no such reform by Modi government which can counter the inflation if the global oil prices make a turnaround. Corporate results since BJP came into power have been weak. Ordinance has become the main tool to accelerate the reforms. But, the reforms through Ordinance are viewed temporary and can not gain the investors confidence.

Ordinance in Land acquisition is the case in point. The controversy over the new Ordinance for land acquisition, sparked by the opposition actions and some cases of farmers suicides, shadowed the Make in India movement and make it a far distant dream. The politicians, who cried against the bill as obnoxious and anti-farmer, could successfully de-throne the bill, given the BJP’s minority in Rajya Sabha.

Prime Minister Shinzo Abe’s three pronged reforms failed to set a steady road for the success. Despite the massive government quantitative easing and fiscal stimulus, Japan fell back in recession in the second quarter of 2014. Initially, inflation inched upwards, but fell back with the dip in global oil prices. It is believed that the country may face deflation again in this year with the rise in oil prices. This means that Mr Abe’s drastic attempt in quantitative easing, despite the country’s high debt, failed to spur the domestic demand. Concerns over the galloping debt (250 per cent of GDP) continue to tinker the highly ambitious policy makers.

Abenomics cheered the officials with the rise in employment. But, this draws a flak when domestic consumption did not increase. The fallacy of the imbalance between the growth in employment and consumption was that employment increased with more numbers of irregular and temporary workers. Since Mr Abe came into power in 2012, the numbers of irregular workers increased by 1.5 million. Irregular and temporary workers number 20 million, constituting about 40 per cent of the Japanese workforce. The increase in job opportunities by irregular employment increased the spending risks of the Japanese consumers. This resulted Abe to defer increase in the consumption tax to 10 percent till April 2017.

In India, investors are looking for tangible changes in the economic policies. They desire to have ground realities conducive to investment. Fiscal incentives are one of the major drivers to woo the investors. India is known for unhealthy tax structure for its high rates of business taxes. At 33 percent corporate taxes, 10-12 excise duties and 26- 28 percent custom duty, business taxes are one of the highest in India.

Japan’s economy needs to be bolstered based on domestic consumption growth and buoyant manufacturing activities. Quantitative easing alone will not spur the domestic consumption, given the perils of aging population. Spur in employment opportunities, catalyzed by incentives for job opportunities on regular basis and easing of immigration, are likely to be boon to the growth in domestic consumption. Japanese binge for overseas investment needs to be reversed into inward investment with more incentives. Incentive is the first and prime attraction to woo the investors. (IPA Service)